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Babayev v. Hertz Corp.

2024 COA 15. No. 23CA0117. Insurance—Motor Vehicle Rental Companies—Uninsured/Underinsured Motorist Coverage—CRCP 56(h)—Actual Insurer—De Facto Insurer.

February 15, 2024

Plaintiffs Babayev and Chikov were passengers in a rental car and were injured when a van collided with their car and fled. They made insurance claims with Hertz Corporation (Hertz), the rental car company, under the uninsured/underinsured motorist (UM) policy in the rental agreement. Hertz did not fully pay their claims, so they sued, alleging breach of contract, bad faith breach of contract, and statutory claims for unreasonable delay and denial of insurance benefits. The parties asked the district court to resolve, under CRCP 56(h), (1) whether Hertz was plaintiffs’ insurer; and (2) if Hertz was not plaintiffs’ insurer, whether Hertz nevertheless owed plaintiffs an insurer’s duty of good faith and fair dealing under applicable case law. Hertz argued that (1) it was neither an actual nor a de facto insurer, maintaining that the actual insurer was Hertz’s insurer, CHUBB Ace American Insurance Company (CHUBB); and (2) it was not a de facto insurer because it had a risk management services agreement (RMSA) with ESIS, under which ESIS handled all claim adjustment and administration for insurance claims against Hertz. The district court held, as a matter of law, that Hertz was neither an actual insurer nor a de facto insurer. Plaintiffs then moved to amend their complaint to include CHUBB and ESIS as defendants and add a claim under the Colorado Consumer Protection Act. The court denied the motion and dismissed the claims.

On appeal, plaintiffs argued that the district court erred by ruling as a matter of law that Hertz was neither an actual nor a de facto insurer. Under Passamano v. Travelers Indemnity Co., 882 P.2d 1312 (Colo. 1994), and various provisions of CRS Title 10, a motor vehicle rental company that offers insurance coverages for specified prices qualifies as an “insurer” under CRS § 10-1-102(13). At the time of Passamano, CRS Title 10 required that all automobile insurers offer UM coverage to their insureds. Subsequently, changes to the statutory scheme were enacted clarifying that rental car agencies are not required to offer UM coverage. However, these changes did not abrogate Passamano’s holding that by offering insurance coverages for specified prices, a motor vehicle rental company qualifies as an “insurer.” Thus, while Hertz was not required to offer UM coverage to its customers, it did so, and thereby it could qualify as an insurer. Here, it is undisputed that Hertz offered to sell the rental car driver various insurance coverages for specific prices. Accordingly, Hertz was the actual insurer of plaintiffs under the relevant statutes and therefore the proper party for all of their claims, and the district court erred.

However, the RMSA provided that claim payments were Hertz’s obligation, and the claim adjuster’s testimony suggested that Hertz had some involvement in adjusting and administering plaintiffs’ claim. The district court did not address whether this evidence was material or created a genuine issue of material fact, as a Rule 56(h) ruling requires. Accordingly, the facts about the extent to which Hertz performed the functions of an insurer were disputed, and the district court erred by resolving this issue under Rule 56(h).

The judgment dismissing the claims was reversed and the claims were reinstated. The case was remanded for further proceedings.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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